Argo CEO under expenses fire from fourth-largest shareholder

Argo Chief Executive Officer Mark E. Watson III has been accused of perpetuating “shockingly high and shockingly inappropriate” corporate expenses over the past decade by Voce Capital Management LLC, the owner of approximately 5.8% of Argo Group’s shares.

Voce, whose 1.9 million shares in Argo make them the fourth-largest shareholder, argues that the company’s apparent sub-par average return on equity (ROE) of less that 6% over the past ten years has been driven by gross misallocations of capital on “wasteful items and frivolous vanity sponsorships” at the expense of shareholders.

Voce states that, while Argo’s costs to acquire premium reflect industry norms and offer little opportunity for savings, the company falls significantly short in the “Other Underwriting Expense” (OUE) category, where all other operating and corporate expenses reside.

“The only pathway for Argo to create sustainable, long-term shareholder value is through a dramatic improvement in its ROE,” explains Voce Management in a statement released today.

Voce goes on to call into question the independence of a Board of Directors it describes as misaligned and inexperienced.

Subsequently, Voce intends to nominate what it describes as four highly-qualified, independent Director candidates.

“Our plan to help Argo reach its full potential begins with substantial, immediate reform of its Board. This must include the election of Directors nominated by shareholders, not management, and who bring the independence, experience and alignment with shareholders to faithfully execute their duties,” the statement explains.

“Therefore today we are formally nominating four outstanding, independent Director candidates for election to the Board of Argo at the 2019 Annual Meeting.”